Strategies CHP 3
Why do firms outsource?
. A firm is likely to engage in outsourcing when it identifies primary and support activities in which its resources and capabilities are neither sources of competence nor of sustainable competitive advantage.
How do firms identify internal strengths and weaknesses
By completing the internal analysis, firms can (must) identify their strengths and weaknesses in resources, capabilities, and core competencies.
Are tangible resources more valuable for creating capabilities than are intangible resources, or is the reverse true? Why
In fact, in the global economy, intellectual and systems capabilities are more important to the success of a corporation than are its physical assets, and the capacity to manage human intellect is now a critical executive skill. Intangible resources are less visible and more difficult for competitors to understand, purchase, imitate, or substitute, and thus firms prefer to rely on these resources as the foundation for their capabilities and core competencies.
Will outsourcing's importance grow in the future
Outsourcing is important to firms competing in the 21st century landscape because few, if any firms possess all of the resources and capabilities that are necessary for them to achieve competitive superiority in all necessary primary and support activities.
Outsourcing
Outsourcing is the purchase of a value-creating activity from an outside supplier that can provide the greatest value.
What does the firm gain by successfully using this tool?
Studying the value chain will enable managers to better understand their cost structure and the activities in which they can create and capture value.
What are the differences between tangible and intangible resources?
Tangible resources are represented by assets that can be seen and quantified. They are not only represented by the firm's physical resources (such as plant and equipment), but also by other assets, such as the firm's borrowing capacity, the skills and attributes of its staff, and its technological capacities. Intangible resources (because they are less visible and more embedded in the firm's history) are more difficult for competitors to understand and imitate. These include such resources as scientific capabilities, knowledge within the firm, organizational routines, or the firm's reputation for quality.
Value Chain Analysis
The value chain is a template that the firm uses to understand its cost position and to identify the multiple means that might be used to facilitate the implementation of its business-level strategy.
core rigidity
These are capabilities that the organization does well but that have little current value from a competitive standpoint.
Why is it vital that managers have a clear understanding of their firm's strengths and weaknesses?
having the appropriate and strong capabilities required for achieving a competitive advantage
Capabilities
represent the firm's capacity or ability to successfully integrate sets of firm resources and deploy these resources to achieve some desired end.
What four criteria must capabilities satisfy for them to become core competencies?
valuable-help firm exploit opportunities rare -possessed by few if any costly to imitate when other firms cant develop them except at a cost disadvantage nonsubstitutable-do not have strategic equivalents
How do firms create capabilities?
It is also critical to recognize that capabilities are based on the development, carrying, and exchange of information and knowledge by the firm's human capital. Thus, a firm's capabilities are a reflection of its knowledge base: the skills and knowledge of its employees and (often) their functional expertise.
Why is it important for firms to use these criteria to evaluate their capabilities' value-creating potential?
It is important for these criteria to be used because a competitive advantage is sustainable over time only when competitors are unsuccessful at duplicating the benefits of the firm's strategy or when they are unable to imitate the strategy.